Nvidia and Other Tech Stocks: Earnings Season Winners

As we gear up for another earnings season, the tech sector is buzzing with anticipation. With heavyweights like Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO) on the cusp of reporting their results, analysts are brimming with optimism, especially concerning artificial intelligence (AI) spending.

Analysts Show Relief Amid Strong Capex Spending

According to analysts from Melius Research, there is a palpable sense of relief in the market regarding Big Tech’s ongoing commitment to hefty AI budgets. The earnings reports released thus far in the March quarter paint a promising picture, highlighting “unwavering” capital expenditure commitments from hyperscale companies. This could bode very well for stocks like Nvidia and Broadcom.

Nvidia, in particular, faces some unique challenges as its operations in China have been curtailed following Trump’s administration’s restrictions on its H20 chips, potentially costing the company over $15 billion in annual revenue. Nonetheless, Melius analysts remain optimistic, pointing out that support from hyperscaler purchases and companies such as CoreWeave and Elon Musk’s ventures could cushion the blow as the year advances.

Looking Ahead: Nvidia’s Keystone Potential

Nvidia’s upcoming quarterly sales report is generating buzz, buoyed by its strong performance in selling H20 chips to China before the imposition of new regulatory restrictions. The analysts anticipate a better-than-expected revenue performance for the April quarter, spurred by brisk sales of Nvidia’s latest Blackwell chip to U.S. hyperscale cloud providers.

However, the looming H20 ban poses risks, whereby analysts predict a sequential revenue hit of around $4 billion to $5 billion in the July quarter. The good news? Following this initial dip, Nvidia is projected to surge back with almost double-digit growth in October and January, spurred by Blackwell deliveries into hyperscalers and Tier 2 clouds.

What’s more, despite the regulatory haze and tariff uncertainties, Nvidia still enjoys tailwinds stemming from advancements in reasoning models and inferencing trends. The company has a clear roadmap to secure hyperscaler orders well into year-end, supported by reaffirmed spending by major cloud players.

Broader Landscape: Opportunities for Other Tech Giants

While Nvidia may be grabbing headlines, Broadcom is set to leverage a promising position too. Analysts noted that Broadcom remains insulated from AI-diffusion regulations that could hit competitors harder, given its supply ties with cloud juggernauts like Alphabet Inc. (GOOG) and Meta Platforms Inc. (META). With these giants ramping up their capex plans, Broadcom is expected to see AI-driven revenue growth rising from $12 billion in FY24 to over $18 billion in FY25 and continuing through 2027.

This growth trajectory should position Broadcom favorably, despite the competitive landscape. Additionally, Microsoft Corp. (MSFT) is also a stock to watch; the tech titan is shedding past excuses and is poised to take the reins of the AI market again, while navigating tariffs with relative ease.

Undeniable Risks Still Linger

While the outlook is overwhelmingly positive, analysts caution that risks remain, particularly for companies like Apple Inc. (AAPL), which could face hurdles from tariffs and regulatory scrutiny. Despite these challenges, analysts believe Apple is on course to revamp its iPhone lineup, which could reignite growth, but a revitalization in services is crucial for the stock to gain momentum.

Melius continues to advocate for a buy rating on Nvidia, Broadcom, as well as Microsoft and International Business Machines Corp. (IBM). IBM is touted as a defensive play with multiple tailwinds, including a significant cycle for mainframes and an anticipated boost in software revenue through its Red Hat segment.

Conclusion: Stay Tuned for Computex

As we inch closer to Nvidia’s keynote at the upcoming Computex trade show in mid-May, excitement builds. This event could be a pivotal moment that shapes market sentiment. For traders, now’s the time to keep a keen eye on these stocks, as incoming earnings results could present excellent trading opportunities.

In summary, while the earnings landscape presents both opportunities and challenges, the bullish momentum from AI investments and cloud spending should fuel optimism heading into the summer months. Keep those charts handy and prep for action—this earnings season could be a game-changer.

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Tech Titans Thrive: Why Nvidia and Broadcom Are the Earnings Season’s Stars